As marketers, we work tirelessly to move the needle on what often seems like a laundry list of metrics:
But what actually matters and makes an impact?
The bottom line. While company leaders theoretically understand that a solid marketing team or marketing partner can directly impact company profits, over 70% of executives don’t believe that marketers are focused enough on results that truly drive incremental customer demand and revenue.
When it comes to marketing metrics that matter, expect to report on data that deals with the total cost of marketing, salaries, overhead, revenue, and customer acquisition.
Forget vanity metrics, here are the 5 critical marketing metrics that the CEO really wants to know.
1. Customer Acquisition Cost (CAC)What is it: CAC is a metric used to determine the total average cost your company spends to acquire a new customer
How to calculate: Take your total sales and marketing spend (program and advertising spend, salaries, commissions and bonuses, and overhead) for a specific time period and divide by the number of new customers for that time period.
Why it matters: CAC illustrates how much your company actually spends on each new customer you acquire. The lower the CAC, the better. An increase in CAC means you’re spending comparatively more for each new customer, which can imply that your sales or marketing efficiency may need to improve.
2. Lifetime Value (LTV)What is it: Do you know how much your average customer brings in over the course of doing business with you?
How to calculate: Take the revenue the customer pays in a period, multiply it by the gross margin percentage, then divide the results by that customer’s estimated churn percentage (cancellation rate)
Why it matters: While not truly a marketing performance metrics, this piece of data is crucial to demonstrating the value of your marketing efforts. You’ll need this metric to calculate other measures and ratios, and can also use it to determine the value of a lead in your sales pipeline and defend your marketing ROI.
3. Ratio of Lifetime Value to CAC (LTV: CAC)
What is it: The ratio of CLV to CAC is a way for companies to estimate the total value that your company derives from each customer compare with what you spend to acquire that new customer
How to calculate: Determine the relation or proportion between the CLV and CAC
Why it matters: The higher the CLV:CAC, the more ROI your sales and marketing team is delivering to your bottom line. However, you don’t want this ratio to be too high, as you should always be investing in reaching new customers. Spending more on sales on marketing will reduce your CLV:CAC ratio, but could help speed up your total company growth
4. Marketing Originated Customer Percentage
What is it: This ratio shows what new business is driven by marketing, by determining which portion of your total customer acquisitions directly originated from marketing efforts.
How to calculate: Take all of the new customer from a period and tease out what percentage of them started with a lead generated by your marketing team
Why it matters: This metric illustrates the impact your marketing team’s lead generation efforts have on acquiring new customers. This percentage is based on your sales and marketing relationship and structure, so your ideal ratio will vary based on your business model. A company with an outside sales team and inside sales support may have a 20-40% of Marketing Originated Customers, while a company with an inside sales team and lead-focused marketing team might be at 40-80%.
5. Marketing Influenced Customer Percentage
What is it: This metrics takes into account all of the new customers that marketing interacted with while they were leads anytime during the sales process
How to calculate: To determine overall influence, take all of the new customers your company accrued in a given period and find out what percentage of them had any interaction with marketing (including all marketing content, channels, assets, and automation) while they were a lead.
Why it matters: This metric takes into account the impact marketing has on a lead during their entire buying lifecycle. It can indicate how effective marketing is at generating new leads, nurturing existing ones, and helping sales close the deal. It gives your CEO or CFO a big-picture look into the overall impact that marketing has on the entire sales process.
Get your C-Suite Excited About Marketing
Reporting on your business impact doesn’t mean that you should no longer pay attention to site traffic, social shares, conversion rates, etc. It simply means that when reporting your results to your C-suite, your performance needs to be conveyed in a way that excites them and shows (with tangible data) how your marketing efforts are contributing to bottom line.
While you can certainly highlight the success of marketing campaigns and increased engagement, be sure to focus on the metrics that matter most to them. When you can present marketing metrics that resonate with your decision-makers, you’ll be in a better position to make the case for budgets and strategies that will benefit your marketing team (and firm revenue) now and in the future.
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